Automotive Insight

All that Glitters The rush is on to cater to millions of millionaires The rich are different from you and me. Mainly, they have a lot more money. And I mean a lot! Today, in America alone there are millions of millionaires, and thanks to the booming economy their ranks are swelling every year. Happily for those who make the things these people like to buy, the rich are spending a lot more money on

All that Glitters The rush is on to cater to millions of millionaires The rich are different from you and me. Mainly, they have a lot more money. And I mean a lot! Today, in America alone there are millions of millionaires, and thanks to the booming economy their ranks are swelling every year. Happily for those who make the things these people like to buy, the rich are spending a lot more money on the finer things in life, not the least of which are expensive cars.

In the recent past, just a few marques catered to the whims and wants of the very wealthy. Rolls-Royce made motor coaches for well-heeled bluebloods, while Ferrari indulged those with a flamboyant taste for the exotic. Arrivistes could settle for brands like Bentley and Maserati that carried almost as much cache for not quite as much cash. But after that, the list fell off sharply.

Today, the upper end of the automotive market is starting to look more like it did in the 1930s. Back then, names such as Deusenberg, Bugatti, Packard, Maybach and Auburn flourished, thanks to the great wealth the rich accumulated during the Great Depression, and because many of those wonderful luxury cars were made using a sort of modular approach. They often started off as standard chassis, then had beautiful bodies fitted by coachwork companies such as LeBaron. That was the key to building them in low volume.

Now many of those names are making a comeback. Mercedes-Benz is reviving the Maybach brand and has already shown off two concept cars that it plans to build. BMW bought Rolls-Royce and announced it wants to significantly increase production. Volkswagen may be the most aggressive of all, having bought the rights to Bentley, Bugatti, and Lamborghini. Fiat now has Maserati as well as Ferrari, and Ford is slowly allocating more resources to Aston Martin.

These cars carry staggering pricetags. They're mostly found in the $160,000 to $225,000 range. But that almost seems pedestrian compared to the roadster Porsche would like to build, priced at $350,000, or the Project Vantage that Aston Martin would like to sell for the same price, both of which are just under the Rolls-Royce Corniche convertible at $360,000.

So why are so many major manufacturers jumping in to the super-luxury segment? They're looking at the growing number of very wealthy people around the world who can easily afford to spend a lot more money on a new automobile. People who spend millions of dollars on their homes, on their yachts or their quarterhorses think nothing of forking out a fraction of a million for a new car.

But how big can this segment be? After all, Ferrari and Rolls-Royce combined sell well under 10,000 cars a year. Is the super-luxury segment going to grow enough to accommodate all the new entrants who want to join in? No one seems to have a good answer to that, but that sure isn't stopping them from plowing ahead.

Automakers eyeing this segment want to create a halo effect for their companies. They want to gain experience on how to cater to the most discriminating car buyers in the business. They want to plant a flag on top of the mountain, showing off their engineering prowess by using exotic materials, electronic gadgets and unique powertrains that simply can't be cost effective in less-expensive cars.

They also want to raise the price ceiling for their existing luxury brands. Once DaimlerChrysler comes out with the Maybach, it can move the upper end of the Mercedes-Benz brand higher still, to a point just under Maybach. BMW can do the same with its cars once it firmly establishes Rolls-Royce under its wing. These super-exotic cars will draw more people to the showrooms (if only to gawk at them), and will radiate an aura that will reflect well on their less-expensive stablemates.

But what happens to the "lesser" luxury brands that are left behind? Can Cadillac and Lexus maintain their panache, when they suddenly don't make quite the statement that their traditional rivals do? When they don't have a more upscale cousin to entice customers into the showroom?

This upsegment surge will put tremendous pressure on companies like General Motors Corp. and Toyota Motor Corp. In GM's case, Cadillac already is choking the company. The most expensive car the world's largest automaker sells, the Cadillac Seville STS, is "only" $50,000. GM has seven other brands that are crammed under Cadillac, and it'll be eight brands when it brings Alfa-Romeo to the American market. That's a lot of brands squashed into a rather narrow price range, which explains why Cadillac will bring out the Evoq and Imaj to break into the $60,000 and $70,000 price segments.

But that's not enough. Not when Mercedes and BMW already have broken the $100,000 barrier. GM needs to figure out how to get into the super-luxury segment or risks getting left behind. Cadillac might be able to do it, but even if it can, it'll take a long time, probably three or four more design cycles.

Many will scoff at the notion that these super-luxury cars will pose a threat to their business. The production numbers will be small and the prices will be sky high. But I see this segment having a lot more impact than the sales numbers suggest.